FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended June 30, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
for the transition period from ____________ to ____________
Commission File number: 0-14593
OUTLOOK INCOME/GROWTH FUND VIII,
A CALIFORNIA LIMITED PARTNERSHIP
----------------------------------
(Exact name of Registrant as specified in its charter)
California 33-0104267
------------------------------- --------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
400 South El Camino Real, Suite 1100
San Mateo, California 94402-1708
--------------------------------- --------------
(Address of principal executive offices) (Zip Code)
(415) 343-9300
-------------------------------
(Registrant's telephone number)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
------- --------
Total number of units outstanding as of June 30, 1995: 35,000
Page 1 of 13
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
OUTLOOK INCOME/GROWTH FUND VIII,
A CALIFORNIA LIMITED PARTNERSHIP
Consolidated Balance Sheets
(in thousands, except units outstanding)
(Unaudited)
June 30, December 31,
1995 1994
-------- --------
Assets
-------
Real estate investments, at cost:
Land $ 7,885 $ 7,885
Buildings and improvements 14,065 13,991
-------- --------
21,950 21,876
Less accumulated depreciation and amortization (4,434) (4,198)
-------- --------
Net real estate investments 17,516 17,678
Real estate held pending foreclosure, net - 7,468
Investment in unconsolidated joint venture 11 404
Cash and cash equivalents 1,934 2,297
Accounts receivable, net 174 147
Prepaid expenses and other assets, net 74 107
Notes receivable from unconsolidated joint venture 769 683
Deferred financing costs and other fees, net
of accumulated amortization of $413 and $786
for 1995 and 1994, respectively 179 203
-------- --------
$ 20,657 $ 28,987
======== ========
Liabilities and Partners' Equity (Deficit)
------------------------------------------
Notes payable $ 14,965 $ 25,205
Accounts payable - 2
Accrued expenses 122 196
Deferred income and security deposits 68 59
-------- --------
Total liabilities 15,155 25,462
-------- --------
Partners' equity (deficit):
General Partner 36 (189)
Limited Partners, 35,000 limited
partnership units outstanding 5,466 3,714
-------- --------
Total partners' equity 5,502 3,525
-------- --------
$ 20,657 $ 28,987
======== ========
See accompanying notes to consolidated statements.
Page 2 of 13
OUTLOOK INCOME/GROWTH FUND VIII,
A CALIFORNIA LIMITED PARTNERSHIP
Consolidated Statements of Operations
(in thousands, except per unit amounts)
(Unaudited)
Six months ended Three months ended
June 30, June 30,
1995 1994 1995 1994
-------- -------- -------- --------
Revenues:
Operating $ 1,783 $ 2,860 $ 725 $ 1,467
Interest and other 84 46 40 9
------- ------- ------- -------
Total revenues 1,867 2,906 765 1,476
Expenses:
Operating (including $86 and
$242 paid to affiliates in
the six months ended
June 30, 1995 and 1994,
respectively) 591 1,055 249 564
Interest 901 1,184 373 580
Depreciation and amortization 476 734 199 368
General and administrative
(including $281 and $299
paid to affiliates in the
six months ended June 30,
1995 and 1994, respectively) 351 339 176 170
------- ------- ------- -------
Total expenses 2,319 3,312 997 1,682
------- ------- ------- -------
Loss before equity in loss of
unconsolidated joint venture
and extraordinary gain (452) (406) (232) (206)
Equity in loss of unconsolidated
joint venture (340) (292) (165) (116)
------- ------- ------- -------
Loss before extraordinary gain (792) (698) (397) (322)
Extraordinary gain on debt
forgiveness 2,769 - 2,769 -
Extraordinary gain on sale of
property - 2,095 - 2,095
------- ------- ------- -------
Net income $ 1,977 $ 1,397 $ 2,372 $ 1,773
======= ======= ======= =======
Net income per limited
partnership "Current Unit" $142.47 $107.02 $173.94 $136.96
======= ======= ======= =======
See accompanying notes to consolidated statements.
Page 3 of 13
<TABLE>
<CAPTION>
OUTLOOK INCOME/GROWTH FUND VIII,
A CALIFORNIA LIMITED PARTNERSHIP
Consolidated Statements of Partners' Equity (Deficit)
(in thousands)
For the six months ended June 30, 1995 and 1994
(Unaudited)
<S> <C> <C> <C> <C> <C> <C>
Limited Partners Total
General ------------- Limited Partners'
Partner Current Deferred Growth Partners Equity
-------- ------- -------- ------ -------- ------
Balance at
December 31, 1993 $ (557) $3,714 $ - $ - $3,714 $3,157
Net income 81 1,316 - - 1,316 1,397
------ ------ ------ ------ ------ ------
Balance at
June 30, 1994 $ (476) $5,030 $ - $ - $5,030 $4,554
====== ====== ====== ====== ====== ======
Balance at
December 31, 1994 $ (189) $3,714 $ - $ - $3,714 $3,525
Net income 225 1,752 - - 1,752 1,977
------ ------ ------ ------ ------ ------
Balance at
June 30, 1995 $ 36 $5,466 $ - $ - $5,466 $5,502
====== ====== ====== ====== ====== ======
</TABLE>
See accompanying notes to consolidated statements.
Page 4 of 13
OUTLOOK INCOME/GROWTH FUND VIII,
A CALIFORNIA LIMITED PARTNERSHIP
Consolidated Statements of Cash Flows (in thousands)
(Unaudited)
Six months ended
June 30,
------------------
1995 1994
------ ------
Cash flows from operating activities:
Net income $ 1,977 $ 1,397
Adjustments to reconcile net income to
net cash provided by operating activities:
Extraordinary gain (2,769) (2,095)
Depreciation and amortization 476 734
Equity in loss of unconsolidated joint venture 340 292
Changes in assets and liabilities:
Accounts receivable (27) (130)
Prepaid expenses and other assets 33 (72)
Deferred financing and other fees (96) 72
Accounts payable (2) 3
Accrued expenses 85 65
Deferred income and security deposits 9 (14)
------- -------
Net cash provided by operating activities 26 252
------- -------
Cash flows from investing activities:
Additions to real estate investments (85) (2)
Proceeds from sale of property - 9,805
Payments received on notes receivable
from unconsolidated joint venture 60 187
Additions to notes receivable from
unconsolidated joint venture (146) (41)
------- -------
Net cash provided by (used in) investing activities (171) 9,949
------- -------
Cash flows from financing activities:
Notes payable principal payments (218) (7,339)
------- -------
Cash used in financing activities (218) (7,339)
------- -------
Net increase (decrease) in cash and cash equivalents (363) 2,862
Cash and cash equivalents at beginning of period 2,297 7
------- -------
Cash and cash equivalents at end of period $ 1,934 $ 2,869
======= =======
Supplemental disclosure of cash flow information:
Cash paid for interest $ 885 $ 1,378
======= =======
- Continued -
Page 5 of 13
OUTLOOK INCOME/GROWTH FUND VIII,
A CALIFORNIA LIMITED PARTNERSHIP
Consolidated Statements of Cash Flows (in thousands)
(Unaudited)
- continued -
Six months ended
June 30,
------------------
1995 1994
Supplemental disclosure of non-cash transaction: ------ ------
Foreclosure on real estate:
Reduction of investment in real estate $ 7,345 $ -
======= =======
Reduction of notes payable $(10,022) $ -
======= =======
Reduction of accrued expenses $ (159) $ -
======= =======
Reduction of deferred financing costs $ 67 $ -
======= =======
See accompanying notes to consolidated statements.
Page 6 of 13
OUTLOOK INCOME/GROWTH FUND VIII,
A CALIFORNIA LIMITED PARTNERSHIP
Notes to Consolidated Financial Statements
June 30, 1995
(Unaudited)
Note 1. SIGNIFICANT ACCOUNTING POLICY
-------------------------------
In the opinion of Glenborough Realty Corporation, the managing
general partner, the accompanying unaudited consolidated
financial statements contain all adjustments (consisting of only
normal accruals) necessary to present fairly the financial
position of Outlook Income/Growth Fund VIII, A California Limited
Partnership (the "Partnership"), at June 30, 1995 and December
31, 1994, and the related consolidated statements of operations
for the six and three months ended June 30, 1995 and 1994, and
the changes in partners' equity and cash flows for the six months
ended June 30, 1995 and 1994.
Note 2. REFERENCE TO 1994 AUDITED FINANCIAL STATEMENTS
----------------------------------------------
These unaudited financial statements should be read in
conjunction with the Notes to Consolidated Financial Statements
included in the 1994 audited financial statements.
Note 3. TRANSACTIONS WITH AFFILIATES
----------------------------
Glenborough Corporation ("Glenborough"), an affiliate of
Glenborough Realty Corporation, has been compensated for property
management services. The following amounts paid to Glenborough
are included in operating expenses for the six months ended June
30, 1995 and 1994:
1995 1994
------ ------
Management fees $ 61,000 $ 143,000
Property salaries (reimbursed) 25,000 99,000
The Partnership also reimbursed Glenborough for expenses incurred
for services provided to the Partnership such as accounting,
investor services, data processing, duplicating and office
supplies, legal and administrative services, and the actual costs
of goods and materials used for or by the Partnership.
Glenborough was reimbursed $281,000 and $299,000 by the
Partnership for such expenses during the six months ended June
30, 1995 and 1994, respectively. Such amounts are included in
general and administrative expenses.
Note 4. NOTES RECEIVABLE FROM UNCONSOLIDATED JOINT VENTURE
--------------------------------------------------
Notes receivable from an unconsolidated joint venture consist of
several notes receivable from the Huntington Breakers Apartments,
Ltd., A California Limited Partnership ("Breakers Partnership")
and interest accrued monthly on such advances. During 1995,
Page 7 of 13
OUTLOOK INCOME/GROWTH FUND VIII,
A CALIFORNIA LIMITED PARTNERSHIP
Notes to Consolidated Financial Statements
June 30, 1995
(Unaudited)
Breakers Partnership made partial payments totaling $60,000 on
the outstanding balance and was advanced $120,000 by the
Partnership to supplement its debt service obligations. The
Partnership has accrued $26,000 in interest on a portion of the
outstanding note balances during the six months ended June 30,
1995.
Note 5. EXTRAORDINARY GAIN ON DEBT FORGIVENESS
--------------------------------------
As the 175 South West Temple debt was approaching its May 1, 1995
maturity, the Partnership sought to extend the maturity date.
Since the amount of the debt was in excess of the carrying and
market values of the property and the existing lender had shown
no willingness to extend the maturity date, or otherwise work
toward a realistic solution, the only prudent action was to
negotiate an amicable foreclosure.
On April 27, 1995, the deed of trust was foreclosed and the
lender obtained title to the property. The outstanding debt
(including previously deferred interest) was $10,022,000 while
net assets totaled $7,253,000, resulting in an extraordinary gain
on debt forgiveness of $2,769,000.
Note. 6. EXTRAORDINARY GAIN ON SALE OF PROPERTY
--------------------------------------
On June 10, 1994, the Partnership sold the Las Palomas
Apartments, a 272-unit apartment complex located at 4040 Boulder
Highway in Las Vegas, Nevada to the Las Palomas Associates, L.P.,
a Delaware limited partnership ("the buyer"). The buyer is not
affiliated with the Partnership or the Partnership's general
partners. The total consideration was $10,387,000 cash.
$7,078,000 of the sale proceeds were used to payoff the
Partnership's 1st and 2nd trust deed loans, which were formerly
secured by the sold property. After the loan payoffs, net
settlement and other prorations, including transaction fees of
$312,000 payable to the general partners, $2,657,000 of net
proceeds were added to the Partnership's reserves. The gain on
sale totaled $2,095,000.
Page 8 of 13
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Liquidity and Capital Resources
-------------------------------
Outlook Income/Growth Fund VIII was formed to invest in improved
real estate which would: (i) generate sufficient cash flow to pay
expenses and to provide funds for cash distributions; (ii)
increase equity through reduction of mortgages; and (iii) have
potential for appreciation.
The Partnership has three types of units: (i) Current Units; (ii)
Deferred Units; and (iii) Growth Units. Each type of unit was
designed to provide a different type of return to the investor.
Although the Partnership was structured as a highly leveraged
investment, it anticipated paying high current cash distributions
(9%) on the Current Units because they represented only 35% of
the funds raised and the Partnership would be able to allocate
all current cash flow to them. The Partnership paid distributions
on the Current Units at a 9% annualized rate from the quarter
ended June 30, 1986 through the quarter ended December 31, 1987,
and at a 6% rate from January 1, 1988, through the quarter ended
June 30, 1988, at which time distributions were suspended. At
this time distributions remain suspended and management is unable
to predict when distributions will resume.
The Partnership operated at approximately breakeven for the six
months ended June 30, 1995, after debt service payments. The
Partnership's relatively high debt ratio has been and continues
to be a burden on its cash flow, but has slightly improved since
the April 1995, 175 South West Temple negotiated foreclosure
discussed below. The general partner continues to explore means
by which the Partnership may further reduce its high debt burden.
On April 27, 1995, ownership of 175 South West Temple, a property
in a joint venture where the Partnership was the general partner,
was turned over to the lender in a negotiated foreclosure sale
prior to the debt's May 1, 1995 maturity. Since the amount of the
debt was in excess of the carrying and market values of the
property and the existing lender had shown no willingness to
extend the maturity date, or otherwise work toward a realistic
solution, the only prudent action was to negotiate an amicable
foreclosure. This negotiated foreclosure relieved the Partnership
of its guarantee for a portion of the outstanding debt.
Management's continuing overall goal is to preserve and protect
the Partnership's assets. The ongoing business plan for the
Partnership is to strive to improve its cash flow within the
limitations of local market conditions, reduce debt and build
reserves. Additionally, the general partner is actively pursuing
the restructuring of existing debt at lower interest rates to
help facilitate the overall plan. The Partnership also continues
to strive to maintain stable operations and endure the challenges
of the market by keeping distributions suspended and offering
experienced day to day management of income and expenditures.
Page 9 of 13
Results of Operations
---------------------
Despite relatively stable average occupancy at San Mar Plaza and
Huntington Breakers Apartments, the slight decrease in average
occupancy at Silver Creek Plaza coupled with the June 1994 sale
of an apartment complex and the April 1995 negotiated foreclosure
on 175 South West Temple, discussed above, has resulted in a
decrease in total rental revenue from $2,860,000 during the six
months ended June 30, 1994 to $1,783,000 during the six months
ended June 30, 1995.
Interest and other revenue has increased during the six and three
months ended June 30, 1995 over the same periods in 1994 due to
the short-term investment of the June 1994 sale proceeds.
As would be expected as a result of two property dispositions in
1994 and 1995, operating expenses, interest expense and
depreciation and amortization decreased during the six and three
months ended June 30, 1995 compared to the same periods in 1994.
175 South West Temple:
On March 6, 1995 a receiver was appointed to manage this property
as a precursor to the April 27, 1995 negotiated foreclosure,
discussed above. An extraordinary gain on debt forgiveness of
$2,769,000 was recognized upon the completion of this
transaction.
San Mar Plaza:
San Mar Plaza was 97% occupied at June 30, 1995, which was one
point below the 98% occupancy level at June 30, 1994. At June
30, 1995, the property had 2,650 square feet of space vacant. As
far as future space availability, one tenant, occupying 1,050
square feet of space is currently on a month to month holdover
while another tenant occupying 1,600 square feet of space is
expected to renew their lease when it expires later in 1995.
Management continues to market its vacant spaces, primarily
targeting national franchises and multi-unit regional operators.
Silver Creek:
Silver Creek was 73% occupied at June 30, 1995, which was nine
percentage points less than the June 30, 1994 occupancy. The
surrounding market is stable but potential tenants are rate and
tenant improvement sensitive. In the first half of 1995, one
tenant occupying 2,300 square feet renewed its lease while
another tenant vacated a 7,000 square foot space upon its May
1995 lease expiration. Another tenant, occupying approximately
3,000 square feet of space is currently under eviction
proceedings. With these spaces opening up, management has
negotiated with a prospective tenant to lease 14,000 square feet
of space in the latter part of 1995, which encompasses the
recently vacated 7,000 square foot vacancy discussed above.
Management is optimistic that current negotiations will result in
new tenants in the second half of 1995. In addition, management
Page 10 of 13
continues to actively market its vacant parcel and has recenlty
just leased (ground lease) a small pad of the vacant parcel.
Huntington Breakers Apartments:
The Huntington Breakers Apartments joint venture arrangement
included an income guaranty from the developer to the
Partnership. The developer defaulted on the income guaranty and
no amounts were ever paid. Following lengthy negotiations, the
developer agreed to pay the guaranteed amounts, but the
Partnership allowed the payments to be deferred and collected as
a priority claim against future cash flow. Under the joint
venture agreement, the Partnership has an annual cash flow
priority of $700,000. The property has never reached this cash
flow and no guaranty amounts have ever been received.
The property was 96% occupied at June 30, 1995 and June 30, 1994.
Lower occupancies in competing complexes have led the competition
to offer heavy concessions and lower rental rates, but management
has been able to hold back from offering rent concessions and
major rate reductions of its own. If the competition continues to
cut their rental rates, management may be driven to respond
accordingly. Through all this, management has continued an
aggressive marketing campaign to attract new tenants and maintain
occupancy. Despite these efforts, the property has operated at a
breakeven cash flow so far during 1995 after reserving for semi-
annual and quarterly debt service payments.
Page 11 of 13
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
The Partnership is not a party to, nor any of its
assets the subject of, any material pending legal
proceedings.
Item 4. Submission of Matters to a Vote of Security Holders
None.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits - None
(b) Reports on Form 8-K
The Registrant filed a Current Report on Form 8-K,
dated April 27, 1995, presenting a summarization of the
negotiated foreclosure of 175 South West Temple along
with its related pro forma financial information.
Page 12 of 13
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
OUTLOOK INCOME/GROWTH FUND VIII,
A CALIFORNIA LIMITED PARTNERSHIP
By: Glenborough Realty Corporation,
a California corporation
Managing General Partner
Date: August 10, 1995 By:
Andrew Batinovich
Senior Vice President,
Chief Financial Officer
and Director
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
OUTLOOK INCOME/GROWTH FUND VIII,
A CALIFORNIA LIMITED PARTNERSHIP
By: Glenborough Realty Corporation,
a California corporation
Managing General Partner
Date: August 10, 1995 By: /s/ Andrew Batinovich
Andrew Batinovich
Senior Vice President,
Chief Financial Officer
and Director
Page 13 of 13
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> JUN-30-1995
<CASH> 1934
<SECURITIES> 0
<RECEIVABLES> 943
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 2182
<PP&E> 21950
<DEPRECIATION> (4434)
<TOTAL-ASSETS> 20657
<CURRENT-LIABILITIES> 122
<BONDS> 14965
<COMMON> 00
0
0
<OTHER-SE> 5502
<TOTAL-LIABILITY-AND-EQUITY> 20657
<SALES> 0
<TOTAL-REVENUES> 1867
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> (1418)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (901)
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> (452)
<DISCONTINUED> 0
<EXTRAORDINARY> 2769
<CHANGES> 0
<NET-INCOME> 1977
<EPS-PRIMARY> 142.47
<EPS-DILUTED> 142.47
</TABLE>
